21. AA Courier Company has offered to buy 1,000 tires at a price of $40. Hudson's Bay Co. Ltd. would not have to fit these, so the $20 fitting cost would not apply. Hudson's Bay Co. Ltd. would, however, have to pay $4,000 to deliver the tires. This order would have no effect on their other business. Should they accept the offer?
a) yes, it will increase operating profit by $6,000; b) yes, it will increase operating profit by $4,000; c) no, it will decrease operating profit by $25,000; d) no, it will decrease operating profit by $19,000; e) none of the above.
Finance and Management Accounting 2014
22. Courier Company has offered to buy 1,000 tires at a price of $40. Hudson's Bay Co. Ltd. would not have to fit these, so the $20 fitting cost would not apply. They would, however, have to pay $4,000 to deliver the tires. This order would reduce their normal sales by 1,000 tires. Should they accept the offer?
a) yes, it will increase operating profit by $6,000; b) yes, it will increase operating profit by $4,000; c) no, it will decrease operating profit by $25,000; d) no, it will decrease operating profit by $19,000; e) none of the above.
23. Suppose Hudson's Bay Co. Ltd had sales in recent years as follows:
2007: $6,125; 2008: $6,431; 2009: $6,753; 2010: $7,090; 2011: $7,445.
Your best estimate of sales for 2012 would be: a) $7,445; b) $7,500; c) $7,800; d) $7,817; e) none of the above. 24. Inventory as at 31st December 2011 for Hudson's Bay Co. Ltd was $1,489. If the cost of goods sold for year 2012 is expected to be $3,000, and they expect to reduce their inventory to $1,000 by 31st December 2012, the company's budgeted purchases of goods for resale would be:
a) $4,000; b) $3,489; c) $3,000; d) $2,511; e) none of the above.
25. At the Hudson Bay Co. Ltd. the cost of goods sold would be:
a) a fixed cost; b) a variable cost; c) a mixed cost; d) all of the above; e) none of the above.
26. At the Hudson Bay Co. Ltd. where wages are a regular hourly amount, the wage expense would be:
a) a fixed cost; b) a variable cost; c) a mixed cost; d) all of the above; e) none of the above.
Finance and Management Accounting 2014
27. At the Hudson Bay Co. Ltd. where wages are a combination of a regular hourly amount and a sales performance related bonus, the wage expense would be:
a) a fixed cost; b) a variable cost; c) a mixed cost; d) all of the above; e) none of the above.
28. At the Hudson Bay Co. Ltd. store rent of $25,000 per month would be:
a) a fixed cost because it does not change in response to changes in sales; b) a variable cost, as the rent is paid every month, and the total rent expense varies in proportion to the number of months; c) a mixed cost, as part of it is fixed and part varies with sales; d) all of the above; e) none of the above.
29. To assess customer profitability the Hudson's bay Co. Ltd. could use:
a) cost/volume/profit analysis; b) budgeting and budgetary control; c) cash flow analysis; d) activity-based-costing; e) none of the above.
30. Dividend policy refers to:
a) the legal requirement to pay at least 50% of all net income as dividends; b) company decisions about raising capital as debt or as equity; c) the limited liability of common shareholders; d) decisions made by the company directors about the amount of dividends; e) none of the above.